THE PHILIPPINE AMERICAN GENERAL INSURANCE

COMPANY, INC. (PHILAMGEN) vs. COURT OF APPEALS

and FELMAN SHIPPING LINES
FACTS:

vessel may not have been overloaded, yet the distribution or

stowage of the cargo on board was done in such a manner
that the vessel was in top-heavy condition at the time of her
departure and which condition rendered her unstable and
unseaworthy for that particular voyage.

On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded

on board "MV Asilda," a vessel owned and operated by
respondent Felman Shipping Lines (FELMAN for brevity),
7,500 cases of 1-liter Coca-Cola softdrink bottles to be
transported from Zamboanga City to Cebu City for consignee
Coca-Cola Bottlers Philippines, Inc., Cebu. 1 The shipment
was insured with PHILAMGEN.

. . .the fact that this vessel was designed as a fishing vessel . .

. and it was not designed to carry a substantial amount or
quantity of cargo on deck. Therefore, we believe strongly that
had her cargo been confined to those that could have been
accommodated under deck, her stability would not have been
affected and the vessel would not have been in any danger of
capsizing, even given the prevailing weather conditions at that
time of sinking.

"MV Asilda" left the port of Zamboanga in fine weather at eight

o'clock in the evening of the same day. At around eight fortyfive the following morning, 7 July 1983, the vessel sank in the
waters of Zamboanga del Norte bringing down her entire
cargo with her including the subject 7,500 cases of 1-liter
Coca-Cola softdrink bottles.

But from the moment that the vessel was utilized to load
heavy cargo on its deck, the vessel was rendered
unseaworthy for the purpose of carrying the type of cargo
because the weight of the deck cargo so decreased the
vessel's metacentric height as to cause it to become unstable.

FELMAN denied the claim of Coca-Cola for damages thus

prompting the consignee to file an insurance claim with
PHILAMGEN which paid its claim of P755,250.00.
Claiming its right of subrogation PHILAMGEN sought
recourse against respondent FELMAN which disclaimed any
liability for the loss.
PHILAMGEN alleged that the sinking and total loss of "MV
Asilda" and its cargo were due to the vessel's
unseaworthiness as she was put to sea in an unstable
condition. It further alleged that the vessel was improperly
manned and that its officers were grossly negligent in failing to
take appropriate measures to proceed to a nearby port or
beach after the vessel started to list.
FELMAN filed a motion to dismiss based on the affirmative
defense that no right of subrogation in favor of PHILAMGEN
was transmitted by the shipper, and that, in any event,
FELMAN had abandoned all its rights, interests and
ownership over "MV Asilda" together with her freight and
appurtenances for the purpose of limiting and
extinguishing its liability under Art. 587 of the Code of
Commerce.
ISSUES:
1. Whether "MV Asilda" was seaworthy when it left the port of
Zamboanga;
2. Whether the limited liability under Art. 587 of the Code of
Commerce should apply; and,
3. Whether PHILAMGEN was properly subrogated to the
rights and legal actions which the shipper had against
FELMAN, the shipowner
RULING:
(a) "MV Asilda" was unseaworthy when it left the port of
Zamboanga. The Elite Adjusters, Inc., submitted a report
regarding the sinking of "MV Asilda." The report, which was
adopted by the Court of Appeals, reads
xxxx the vessel was top-heavy which is to say that while the

The proximate cause of the sinking of "MV Asilda" was its

being top-heavy. Several days after "MV Asilda" sank, an
estimated 2,500 empty Coca-Cola plastic cases were
recovered near the vicinity of the sinking. Considering that the
ship's hatches were properly secured, the empty Coca-Cola
cases recovered could have come only from the vessel's deck
cargo. It is settled that carrying a deck cargo raises the
presumption of unseaworthiness unless it can be shown
that the deck cargo will not interfere with the proper
management of the ship. However, in this case it was
established that "MV Asilda" was not designed to carry
substantial amount of cargo on deck.
The strong winds and waves encountered by the vessel are
but the ordinary vicissitudes of a sea voyage and as such
merely contributed to its already unstable and unseaworthy
condition.
2. Art. 587 of the Code of Commerce is not applicable to the
case at bar.
Art. 587 states: The ship agent shall also be civilly liable for
the indemnities in favor of third parties which may arise from
the conduct of the captain in the care of the goods which he
loaded on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the freight
it may have earned during the voyage.
Art. 587 speaks only of situations where the fault or
negligence is committed solely by the captain. Where the
shipowner is likewise to be blamed, Art. 587 will not
apply, and such situation will be covered by the
provisions of the Civil Code on common carrier.
Closer supervision on the part of the shipowner could have
prevented this fatal miscalculation. As such, FELMAN was
equally negligent. It cannot therefore escape liability through
the expedient of filing a notice of abandonment of the vessel
by virtue of Art. 587 of the Code of Commerce.
Under Art. 1733 of the Civil Code, "(c)ommon carriers, from
the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers
transported by them, according to all the circumstances of
each case . . ." In the event of loss of goods, common carriers

are presumed to have acted negligently. FELMAN, the

shipowner, was not able to rebut this presumption.
3. PHILAMGEN's action against FELMAN is squarely
sanctioned by Art. 2207 of the Civil Code which provides:
Art. 2207. If the plaintiff's property has been insured, and he
has received indemnity from the insurance company for the
injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to
the rights of the insured against the wrongdoer or the person
who has violated the contract. If the amount paid by the
insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from
the person causing the loss or injury.
The right of subrogation is not dependent upon, nor does it
grow out of any privity of contract or upon payment by the
insurance company of the insurance claim. It accrues simply
upon payment by the insurance company of the insurance
claim.
Therefore, the payment made by PHILAMGEN to Coca-Cola
Bottlers Philippines, Inc., gave the former the right to bring an
action as subrogee against FELMAN. Having failed to rebut
the presumption of fault, the liability of FELMAN for the loss of
the 7,500 cases of 1-liter Coca- Cola softdrink bottles is
inevitable.